London, 30 April (Argus) — Amending the auction schedule, as proposed by EU climate action commissioner Connie Hedegaard this month, is only a short-term fix to the EU emissions trading scheme (ETS), International Emissions Trading Association (Ieta) European policy director Simone Ruiz told Argus.
“Ieta supports introducing flexibility on the supply side on a permanent basis. This is a short-term fix with a certain predictability because it is presented in a way in which the commission will not intervene regularly in the market, so it is a less severe market intervention,” she said. But it is also less permanent than other measures, she said. “It remains a short-term fix that does not deal with the oversupply. Here we would need a more permanent revision of the rules — including the cap setting process and the cap itself.”
The intention now is to reduce volumes in early years and raise them in later years, so as to align the auction profile over the years, Ruiz said. “This is not going to be the 1bn shift of a set-aside. The set-aside question is still linked to the EED [energy efficiency directive] and the impact of the EED on the market, so it would only remove additional allowances because of an additional measure.”
An adjustment formula of the emissions cap whereby economic conditions are factored in is a measure that would most support the ETS, Ruiz said. But this requires co-decision, she said, where the commission makes a proposal and parliament and council co-decide. “The ETS directive would have to change if you wanted to change the supply. Right now it is a linear reduction factor and is independent of the economic situation.”
The revised auction regulation would also be unlikely to be ready in time to have an impact on the 120mn t CO2 equivalent of phase 3 early auction volumes due to come to market this year. The earliest a change to the auction regulation could be made is at the end of this year, Ruiz said. Even if the proposal comes out in June, the entry into force will not be until the end of this year.
But the more pertinent fact is that the commission would be unlikely to alter the early auction volumes, according to Ruiz. “There was no real need for the commission to bring in volume ahead of time,” she said. “But the commission has said that it will not change this on the basis of price development. It would be against their declaration of intent to change the amount of early auctions and they are very cautious to not interfere too much in this market.”
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